12-02-2018

BUSINESS A.M. FEBRUARY,

BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 26 ENERGY, POWER & RENEWABLE Nigeria rig counts rise by 3 as global count climbs in January, says Baker Hughes NNPC intensifies crackdown on petrol hawkers to eliminate fuel queues Bukola Odufade In a bid to eradicate fuel diversion of any kind to bring normalcy back to the fuel supply and distribution chain, the Nigerian National Petroleum Corporation (NNPC) said it has sustained its crackdown on erring marketers and fuel hawkers through its special task force on filling stations monitoring, which have apprehended more fuel hawkers. “In the latest raid yesterday (Thursday February 8) in Abuja, the task force apprehended four illegal fuel hawkers with jerry-cans of petrol. They are: Mohammed Mubarak, Idris Idris, Abu Yakubu, and Bashir Usman,” a statement singed by Ndu Ughamadu, group general manager, group public affairs division of the NNPC read. Ughamadu said the illegal fuel hawkers been handed over to the Nigeria Security and Civil Defence Corps for prosecution, adding that three other fuel hawkers - Salihu Ibrahim, Ayuba Alilu, and Magaji Umar - that were arrested earlier in the week have been charged to the Magistrate Court, Wuse 2, Abuja. “Of the three, only one, Magaji Umar, pleaded guilty and was fined N5,000 by the Magistrate, which he promptly paid and was released. “The other two, Salihu Ibrahim and Ayuba Alilu, pleaded not guilty and were ordered to be remanded at the Keffi Prison. The case was adjourned till 22 March, 2018. “ NNPC task force have apprehended more fuel hawkers recently Bukola Odufade Signs that drilling activities in the oil and gas industry are picking up and reflecting the increased crude oil production in Nigeria are showing up in the number of rigs being deployed to the field by oil producing companies, according data supplied by United States-based Baker Hughes Incorporated. Nigeria’s rig counts rose from nine in the month of December, 2017 to 12 in January, 2018, the data show. The recorded increased rig counts show increased activity and confidence in the Nigerian oil and gas industry. With oil prices still in the $60 range, activities are picking up in the region despite threats from Niger Delta Avengers. Nigeria’s crude production currently stands at 1.8 million barrels per day and Ibe Kachikwu, state minister of petroleum, earlier said Nigeria is looking to increase production to 2.2 million barrels per day. The data released by Baker Hughes Incorporated revealed that world rig count also witnessed an increase of 86, as it recorded 2,175 in January 2018 as against 2,089 in December. The OPEC members recorded a total of 399 rig counts in January as against 396 recorded the previous month, indicating that Nigeria’s United Capital analysts call for cleaner, renewable energy on fluctuations in gas-generated power Bukola Odufade POWER ANALYSTS are calling for a largescale diversification to cleaner and renewable energy such as solar, wind, and biomass to ensure more reliable electricity supply. The call is at the instance of vagaries and fluctuations in power generation in the country, which have been affected by too much reliance on gas-powered thermal stations, requiring high maintenance costs with some adverse environmental impacts. “Generation remains inhibited by heavy reliance on gas-powered thermal plants, requiring high maintenance costs with some adverse environmental impacts. Power depends on events in the oil & gas sector, which faces hydra-headed challenges of lack Iraq was second to Nigeria in terms of increase in rig count. Iraq rig counts increased from 54 to 56 in January 2018 additional rig counts deployed were responsible for the rise in member countries rig counts. Iraq was second to Nigeria in terms of increase in rig count. Iraq rig counts increased from 54 to 56 in January 2018. Saudi Arabia followed, slightly increasing by one to make the total rig counts 112; U.A.E also rose by one to reach 52. However, OPEC members like Venezuela, after adding 10 last December, shed 2 to land at 48. It had previously recorded 50 rig counts. Angola having recorded 2 decreased to one, and Ecuador also recorded a loss of one rig count. Five other OPEC members showed no changes in their rig counts namely, Algeria which remained at 50 rig counts, Kuwait at 53, Qatar also at six, Gabon recorded two, and Libya recorded one each. Going by regional rig counts, in Africa units increased to 80 from 77. In North America the US was up 62 units to 937, a rally of sorts, as it marked the first increase in average monthly rigs running since July 2017, while Canada was up 71 units to 278. Latin America gained six units in January to berth at 191 rig counts. Generation remains inhibited by heavy reliance on gas-powered thermal plants, requiring high maintenance costs with some adverse environmental impacts of cost reflective gas price, poor gas infrastructure, and frequent pipeline vandalism,” analysts at United Capital Research said. In their Daily Market Commentary, Thursday, February 8, 2018, the analysts specifically noted that energy generated in Nigeria have fluctuated to peaks and lows because gas-powered thermal stations account for most of the electricity generated. Citing NBS data, they affirm that an average of 94,627Mwh or 77.5% power was generated via thermal stations in Q4- 17compared to 22.5% from hydro power, adding that over 40 percent of gas reserves are flared as it is more profitable due to uneconomic pricing. Meanwhile, hydro powered turbines are prone to seasonality and weather conditions. They stated that while recent strides, such as the improved wheeling capacity of the Transmission Company of Nigeria (TCN) to 7000MW, the 450MW Azura power project in Benin, and the recently signed Ogun State/ private sector MOU to generate 286MW, are commendable, there is need for a large-scale diversification to cleaner and renewable energy such as solar, wind, and biomass, which is needed to ensure more reliable electricity supply. “In addition, a complete liberalization of the sector, amongst other bold policy changes are urgently needed to drive it out of the doldrums,” they stressed.

BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 MANUFACTURING & INDUSTRY 27 Odds against manufacturing Ease of doing business at risk of failure really moving out of the country to set up their businesses. Because if I import a product and I am supposed to clear the product with about N500,000 and I end up spending over N1.5 million on clearing, that’s a huge disadvantage. I cannot compete favourably with those that are importing. That is the problem we have in this country. It’s the officials that are frustrating government policies. Being a pioneer manufacturer of any product or service in a country like Nigeria is not an easy task, considering myriads of challenges experienced, occasioned by government’s negligence to provide direction. With enough experience gained from the manufacturing sector over decades, United Kingdom trained engineer, MANNY IGBENOBA, is a ‘walking knowledge’ on manufacturing issues in the country. Igbenoba is the Managing Director, 7T Microns Powder Limited, and he relayed several difficulties and challenges manufacturers go through in setting up businesses in Nigeria. From the importation of raw materials, the Customs, taxes, getting funds from banks, documentation, down to the officials sabotaging government’s efforts, they are eye opening. Not even the present policy on the Ease of Doing Business by the present administration has lessened the burdens of Nigerian manufacturers, he said. But in spite of all these challenges, Igbenoba, who recently pioneered another product, a thermoplastic road marking paints that will save Nigeria over $113 million in foreign exchange annually, said local production is the only way to go if Nigeria must develop. He was interviewed by AJOSE SEHINDEMI. What challenges do manufacturers face when setting up business in the country? The challenges manufacturers face are many. For me, it is like when you have a dream of setting up an industry in Nigeria, it looks brighter on paper. But when you really get to actualise it, then you will discover you are actually swimming against the tide, especially if you have to import raw materials for production. It’s easy when you have the money, but when you have to source funds from the banks, or the Bank of Industry (BOI), to get the necessary approvals is a lot of stress. For instance, if you are going into the chemical sector, you will have to get approval from NAFDAC, permission from Standards Organisation of Nigeria (SON), and from the Nigeria environmental regulatory body. You have to get approval also for SON- CAP. You have several approvals to go through. Belonging to the Manufacturers Association of Nigeria (MAN) helps, because you can exchange ideas and get support. But we [manufacturers] all have many issues. Number one is the power supply issue, it is discouraging. For example, in a company like ours, we end up spending N1.6 million in a week to run the generator. The public power supply comes about two times in a week. At the end of the month, we have to spend close to N670,000 on electricity for this small plant. We spend close to N1.6 million on diesel every week and at the end of the month, we still spend such a huge amount on electricity. What do you experience while importing raw materials? The worst of it is when you are importing. The government will give such flamboyant impression that they are supporting Nigerians to set up factories locally. What about the officials that would actually carry out the instructions, Customs duties, charges at the end of the transaction? One is supposed to get, at least, about 20 per cent discount between the imported item and the manufactured items in Nigeria. Because if you have less than 10 per cent, that means there is no attractive factor there. The imported thermo plastic road marking paint came and sold at about N12,500, but our final product is sold for N11, 600. What are the enhancing factors? If we import the raw materials to produce, clearing it would be a herculean task in spite of being a member of all these special groups. If one gets to the bank, Customs tariffs would still be high. Whereas, being a member of these bodies ought to have ensured that one gets a discount on the raw materials for local production. But if one does not want the goods to go into demurrage, then one just has to pay the extra fees quoted by the Customs officials, even if you have all the documents and one is helpless to do anything. Tell us about your company’s backward integration policies, do you source your materials locally or you import all? I can say that 70 per cent of our raw materials are sourced locally while the remaining 30 per cent are imported, but the cost of sourcing and delivery to the warehouse is almost the same as the 70 per cent sourced in Nigeria. That means we are not making any headway because if the cost of bringing raw materials is high, the cost of production will also be high. So the 70 per cent sourced I want to ensure that people in Nigeria, get something better than what they are importing locally has been rendered useless. For instance, in Ghana, they are actually encouraging firms to come and do business. The Ghanaian government will give you loan with nothing more than about five per cent. If you have a partner in Ghana, five per cent, and it gives you a grace of two years before you can start paying back. With that grace of two years, though the market is not as big as the Nigerian market, but there is normalcy in business in Ghana, Ivory Coast, and Cameroun. But in Nigeria, before you transport one finished product from one end to the other, you have to pay. If you do not, the driver cannot go anywhere. So if you now put all the costs together, you discover that you would have incurred more. What is the impact of the Federal Government’s Ease of Doing Business initiative on your company, considering the ranking from the World Bank, which stated that the country is doing well? If I say the impact of the Ease of Doing Business on private sector has been positive, the percentage is not up to 10 per cent. The ease of doing business is a mental policy, but the attitude of implementers needs to change. There is corruption from top to bottom in this country. That is the truth. Because if the government says it is supporting the investor to have an industry here, this is not supported by the fact that from the local, to state and federal governments, all that you have to pay is really frustrating. Yes, not until the government says specifically what an industrialist would pay; and not until it finds a way of enforcing that and making it easier for manufacturers to get their products at the right time, then setting up an industry in Nigeria would not be effective, as anybody is seeing on paper. I am still emphasizing it, if you have an industry in Ghana, it would not take you one week to clear your raw materials. But in Nigeria, even if you have all the documents right, you cannot clear your goods easily; it takes weeks. Nigeria was said to be out of recession, but in your opinion, has the country exited recession? From the manufacturing aspect of assessment, we are actually getting better, but we’re not really there. The manufacturers are crying because local government bills are there, the state government bills are there, the federal government’s numerous bills are there. So how do you then set up industry when you get bills in a suicidal manner? How do you want this policy to be on the positive side? Manufacturers are crying every day. If I show you the details even within the Manufacturers Association of Nigeria, they are crying every day. Though the decision makers are trying to come up with solutions, but they cannot enforce what is beyond their office. Due to all these inimical policies, some of our members are In spite of all these challenges, you are still in business. What’s your motivating factor, what’s your driving force? The driving factors, that is very simple – it’s what I want to explore. I want to ensure that people in Nigeria, get something better than what they are importing. If we all sit on the fence and don’t do anything, relying on the false rhetoric that Nigeria cannot do it, then we will not get there. Somebody must be there, and by the grace of God, in two, three or four years, I hope that our policy would be able to accommodate so many entrepreneurs. For example, if I have the knowledge of inventing the paint and I do not do that, that is not in the interest of Nigeria. That is what I mean. We started tiles adhesive in this country almost about 15 years ago. The tiles adhesive that is being imported from China and India is in Nigeria. When we started, we proved that in Nigeria, we can produce it. That is the same driving force behind my organisation pioneering the road marking paints in Nigeria. Is it the right time to produce considering the various challenges? This is the right time to go into production; there is no terrain that is not turbulent. Even though the terrain is turbulent, if we have to wait for the time that there would not be any problem, then there would not be any development in this country. I must tell you the truth, I am here to prove that made in Nigeria products can do better than what is being imported into this country. Yes, we are going to prove the fact that in Nigeria, we can do something better. How can we say in Nigeria, we are importing 100 per cent thermoplastic road marking paint? It’s ridiculous! When we studied in the United Kingdom, almost 30 years ago, we were first of three people in the UK on this production line. I was in the UK some months ago and somebody asked me what I was doing, that I’ve been part of the system there and that the business now is worth billions of pounds. I was working in the UK. I came back in 1979. And when I came back, I worked briefly with the military. And I said no, something must happen here. We must do something. That’s how we started the tiles adhesive. And we’ve added some other products. Now in that same spirit, I am tired of Nigeria importing this product, that is how we started. But the first challenge we had was when we needed to do analysis. Anyway, I won’t mention the university. I approached them for the analysis. You know how much they wanted to collect? N5.6 million! And I said to myself, why must I pay N5.6 million? And I sent it to UK. You know how much we paid? £520! Can you compare that? If we have been discouraged, nothing would have happened. And I can tell you in about a year or few years’ time, other companies will come up with thermoplastic paint. This is because they would have come to know that it is doable in Nigeria.